From stores to the streets: SnapScan’s road to a cashless society


This week, SnapScan rolled its app out to The Big Issue vendors across South Africa, the non-profit magazine that’s usually sold at intersections in urban areas. People with the app can now purchase the latest issue by simply taking a photo of a QR code and typing in the amount they want to pay. There’s no hassle of fiddling for your wallet or looking for change lying around in the car before the light turns green.

The Big Issue vendors are just one group of 12 000 other merchants across South Africa currently accepting SnapScan payments. Speaking at Stellenbosch Digital, SnapScan Co-Founder Kobus Ehlers discussed the startup’s inception and where it currently stands.

SnapScan wants to see a cashless, frictionless society. For the customer, the app poses an alternative to cash and credit cards because it’s faster. Customers don’t need to wait in a queue, or for the PoS terminal to finish processing their payment. You can simply take a picture of the merchant’s unique QR code, enter the amount, and they’ll be notified either via SMS or their PoS system.

The merchant can set up the system in five minutes (SnapScan claims) with no hardware required other than a mobile phone. This means that any person selling apples on the street to a department store can integrate SnapScan. There are also fewer costs involved compared to setting up a credit card terminal, the only charge being a 3% transaction fee.

Secondly, it’s meant to be more secure. With SnapScan’s method of payment, the merchant never has to handle your details or card. The app user’s card details are stored on their smartphones and protected with their personal PIN codes.


So how did it all begin?

Ehlers entered the payment tech space a few years ago, supported by technology incubator FireID based in Stellenbosch. SnapScan is the product of many prototypes that came before it. “We thought it would be cool if we could find a way to buy a cup of coffee using only our smartphones,” Ehlers noted.

Before SnapScan, the team experimented with everything from peer-to-peer payments to real-time online transactions, and the lot.

For instance, they built a tool that replaced the online shopping cart, where online shoppers don’t have to type in their details every time they checkout. It was smooth and managed to record successful growth for the sites of up to six or seven percent. At the time, however, the local ecommerce space saw more than 100 to 150% growth, and such a new integration would pose more risk than really required.

Ehlers and his team was also behind Mxit Money, a digital money service that leverages Africa’s biggest social network. Mxit users were able to send money to anyone with a mobile phone and to other Mxit users for free. The service would have allowed people to deposit and withdraw cash as well as buy airtime and electricity using money from their Instant Money account via Mxit Money.

As we had to find out the hard way, mobile transactions has struggled to gain traction in South Africa compared to other African markets like Kenya or Tanzania.

Soon after, Ehlers made the daunting decision of focusing on real-world payments. Still operating in and around the humble student town of Stellenbosch, the pay-via-QR code process was then put to test and validated at the various slow food markets that operate in the town.

Ehlers said that it’s difficult to get people’s attention and to keep them interested. In order to lure customers, he recalls, the startup used to give away free coffee mugs, or beer, with every new purchase made with SnapScan.

Eventually, the service started gaining traction and soon expanded to physical stores outside of Stellenbosch into Cape Town and Johannesburg. At the end of 2013 it had over 600 merchants under its belt. It now averages 300 new merchants every day, sitting over 12 000 currently.


A map of all the top merchants accepting SnapScan in and around Cape Town.

Road to riches

The one thing that really gave the company nudge or two on to the scene was winning the MTN App of the Year Award in 2013. SnapScan bagged the press, R50 000, and a big Angry Birds toy.

Initially Ehlers was skeptical about the App Awards. “We didn’t have time to enter competitions. The people who are successful are so busy running their businesses and building products,” Ehlers said. It did however turn out for the better as it gave SnapScan a massive marketing, not to mention confidence, boost.

“We were competing with the likes of Absa, FNB, and Ster Kinekor. Our annual budget was less than one of their marketing budgets,” Ehlers said.

Soon after the competition, at the beginning of 2014, SnapScan partnered with Standard Bank, a big local influencer, which has proved to be a big boost for the company thus far. It, for instance, now had the budget to roll-out its very own TV ad.

The product can still be used by anyone with a credit card regardless of their bank. Ehlers said that while his team went through various prototypes and products, the key is finding the right harmony between getting enough money, to get customers, to build the product, to get more money, and so forth. “Building the tech is easy, it’s finding the right business model that’s hard,” he said. Ehlers further explained:

“Introducing mobile payments means building an entire marketplace. You have to grow both the user base and the merchant network. This a classic chicken-or-egg problem and that makes this a particularly hard challenge.”

Going forward, SnapScan is looking to add a couple of subtle yet crucial features such as the ability for the user to add multiple credit cards. Adding new features is tricky though. One thing that makes the app so attractive is its simplicity. Ehlers said that “Users want you to add hundreds of new features, but as soon as you build them they hate you for it.”

“There are some interesting changes coming in the next few months. We are also looking at a range of new places and ways to pay using SnapScan. We are also actively looking at other markets,” Ehlers told Ventureburn.

In the last three months, a couple of services have popped up across South Africa which has added to the existing lineup of competitors in the mobile payments arena. Some of these competitors include physical devices that plugs in your phone like Nedbank’s PocketPOS, Absa’s Payment Pebble, ZipZap, and the more recent iKhoka.

Like SnapScan, FlickPay is an app that you can use to pay merchants. Unlike SnapScan, it uses the merchant’s tillpoint to scan your phone’s QR code, and is targeting the larger retailers.

We all know that South Africa’s market is extremely complex and unique. SnapScan’s success thus will depend on whether or not South Africa is ready for a mobile payment solutions.

The fact that SnapScan has managed to scoop up over 12 000 merchants in such a short time is very impressive, the question is whether it will be able to add 1 million in the next two years. Ehlers adds, “That is a great start, but we still have a long way to go. SnapScan is aiming at places where there is a real payment problem, rather than just trying to compete with card machines. “

Jacques Coetzee: Staff Reporter


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